The FCA chief warns of potential consumer harm from AI-driven insurance.
- Nikhil Rathi emphasises the need for responsible AI use in financial services.
- Concerns over hyper-personalised plans leaving some consumers uninsurable.
- The importance of discussing risks and trade-offs in AI implementation.
- Dynamic pricing controversies highlight public acceptance issues.
The incorporation of artificial intelligence in financial services has drawn significant attention, with Nikhil Rathi, the chief executive of the Financial Conduct Authority (FCA), highlighting potential concerns. He emphasised that while AI has the potential to drive beneficial innovation, there is a risk that it could lead to the creation of insurance plans that are too personalised, potentially leaving some consumers without coverage. Such outcomes could increase discrimination within the insurance industry, Rathi warned during his speech at the StepChange Connected conference in Leeds.
Rathi pointed out the benefits seen by some companies, such as an Edinburgh-based fintech utilising anonymous chatbots to effectively provide debt advice and reduce associated stigma. However, he cautioned that there is a need for an open dialogue about the risks and compromises inherent to AI technology. While AI can tailor premiums with unprecedented precision, this hyper-personalisation may not always be beneficial for all consumers.
The potential benefits of AI are still largely uncertain, as Rathi acknowledged, but the experience from other sectors suggests that resolving foundational issues could yield significant positive impacts. He posed a critical question to the audience: Should society accept that some failed experiments or the inability of some individuals to benefit from innovations are worth the broader gains in consumer satisfaction and economic productivity?
Rathi further illustrated his points by referencing recent controversies surrounding dynamic pricing, specifically citing the public backlash over pricing strategies for Oasis concert tickets. He asserted that even if something is technically feasible, it does not guarantee public acceptance. This serves as a crucial reminder of the potential public resistance AI-driven strategies might encounter.
AI implementation in insurance requires careful consideration to balance innovation with consumer protection.
